Examination of Witnesses (Questions 198-199)
MS SARAH
HARRISON AND
MR CHARLES
HARGREAVES
10 DECEMBER 2008
Q198 Chairman: We welcome our second
set of witnesses. I am sorry our previous session overran a little
bit. When you are on a voyage of discovery you never quite know
where you are going to pitch up. You can see we were probing one
or two areas with some thoroughness. Can I welcome, on behalf
of the regulator, Ofgem, Sarah Harrison, managing director, and
Charles Hargreaves, the head of environmental programmes. One
of the flavours that came out from our earlier evidence, some
of which you may have heard, is a feeling that we have met something
of a watershed. Our earlier witnesses said there needed to be,
at this moment, a fundamental rethink about the approach towards
fuel poverty issues. That was not to say that some useful work
had not already been done, that was not to say that existing programmes
were not capable of contributing towards the problem but I think
they felt that efforts needed to be refocused. How do you feel,
as an organisation, about statements like that, bearing in mind
we do seem to be on an upward trend with reference to the number
of people, by our current definition of fuel poverty, who are
within that category?
Ms Harrison: You will find in
our own written submission we have also made the point that it
is a good time to take another look at the strategy. Perhaps I
could go back to some suggestions that Ofgem itself made to government
in 2006 in response to the Energy Review and return to some of
the ideas which we still think bear consideration today; the first
relates to the range of different schemes and measures that exist.
In 2006 we argued for government to think about whether there
was scope to pool the resources of some of those schemes and to
look to create a function to centrally administer them for two
reasons: one, to look at ways of making sure those schemes worked
in synchronicity with one another and complementing one another;
and the other issue being, from a customer and householder perspective,
to make sure those measures and schemes were well understood.
The second principal point we made again in 2006, but certainly
relevant today, is the central challenge of targeting and identification;
we dubbed it a find and fix approach. We are very pleased to see
some progress has been made in relation to data sharing. We think
this remains a central challenge and would certainly encourage
government to look at ways in which data can be made available,
with all the appropriate protections—and I note some of
the comments that came out from the earlier session on that—to
really target help effectively. If I could give one small example
of a find and fix approach and schemes working together, when
Ofgem hosted, in April of this year, a fuel poverty summit, led
by our chairman John Mogg, the whole objective of that was to
try and see what could be done, very practical actions, to better
target existing help to households most in need. One of the schemes
and trials that came out of that was a partnership between suppliers
and eaga. Where eaga people are in households giving advice on
Warm Front measures, giving advice on benefits entitlement, as
the eaga scheme allows, they were also prompting that householder
to think about approaching their supplier to get tariff advice.
The trial has been running, and has just come to an end, targeting
3,000 households and has been very successful in terms of householders
approaching suppliers and looking for further tariff advice and,
in some cases, moving on to better tariffs or indeed social tariffs.
That is a modest example, but for us a very good example, of where
the need to bring schemes together to have a more holistic approach
really can bear fruit. The other slightly nearer-term issue I
would like to highlight for the Committee is given the fundamental
challenges of fuel poverty incomes, energy prices, housing and
energy efficiency, from an incomes' perspective it still is extraordinary
that in terms of benefits uptake we have some £6 billion
to £10 billion of unclaimed benefits. I know there has been
some relatively recent research done on this by Help the Aged
who identified that over their lifetime an older citizen could
be entitled to up to £50,000 of unclaimed benefits. There
is a very near-term issue, particularly as we face the very obvious
challenges of this winter, of seeing what more could be done to
improve benefits uptake because that will increase the incomes
available to households and help them to face the challenges of
rising energy bills.
Q199 Chairman: You provide us with
a very helpful background, and in terms of the effectiveness of
some of the programmes we will come on and ask some questions
in more detail so I will restrain my enthusiasm for following
your well-placed analysis. I would like to ask about Ofgem because
your principle remit has been about securing competition, if you
like, overlain by environmental and social policy. The Secretary
of State in his recent remarks seems to be taking some issue and
perhaps raising the question as to whether all these competitive
mechanisms have served customers well and serving notice that
dealing with the fuel poor is going to be an important priority
of the new department. Do you think, in the light of my question
and the remarks of the Secretary of State, this means Ofgem will
have to consider how it balances its response to the different
things for which you are responsible?
Ms Harrison: My first point is
that Ofgem's principal objective is to protect customers, and
to protect customers wherever appropriate through the promotion
of competition and where not through regulation. Parliament has
very recently revisited just this issue and has given Ofgem, in
some respects, a fresh mandate confirming that should remain its
principal goal: the protection of customers' interests where appropriate
through promotion of competition and elsewhere through regulation,
but customers in a sense of both today's customers and future
customers. Parliament has also raised up the hierarchy and given
more prominence to our role in respect of sustainability and we
very much welcome that mandate. What is very important against
the background of the goal to protect customers' interests is
we see there are a number of things for us to do: first of all,
coming back to the question of fuel poverty and thinking about
the contribution of high energy prices in relation to fuel poverty,
it very much is to ensure that the prices that energy customers
are paying are fair in the sense of reflective of cost and are
no higher than they need to be. We do that through the exercise
of our powers as a competition authority and indeed through our
more bread and butter work of setting the revenues of the monopoly
energy transportation businesses to allow them to invest in infrastructure
and to secure value for money for customers in that process. We
see very much the challenge in relation to making the competitive
markets work effectively for customers as a key issue. Of course
we have spent the last few months doing a very forensic look at
the way in which the energy retail market is working for customers.
While we have found in some important respects it is working well
and there is no cartel and we are satisfied in a number of respects,
we have found that it has fallen short of working well for some
customers, customers on pre-payment meters, customers who are
off the gas grid for example. There we have put out some detailed
proposals that we are testing, and have just completed that testing
process, as to how we make those markets work more effectively
on behalf of those households. In that respect we very much share
the Secretary of State's goal to be sure that the market is delivering
very effectively and fairly for all customers particularly for
those who are vulnerable and facing fuel poverty.
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